Thank you, operator, and good morning, everyone. Welcome to the Trecora Resources Third Quarter 2020 Earnings Conference Call.

The earnings release was distributed over the wire services after the close of the financial markets yesterday afternoon. Presenting on our call today will be Pat Quarles, President and Chief Executive Office and Sami Ahmad, our Chief Financial Officer.

Christopher Groves, our Corporate Controller, will also be available for the question-and-answer session later, which follows the management’s prepared remarks. Before we get started, I'd like to review the safe harbor statement.

Statements in this presentation that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management's beliefs and expectations only as of the date of this teleconference, November 04, 2020.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks as well as others are discussed in greater detail in Trecora's filings with the SEC, including the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q.

During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued after the close of the financial markets yesterday afternoon.

This webcast is accompanied by a slide presentation that is available on the Investors section of the company's website at www.trecora.com. At this time I’d like to turn the call over to Trecora’s President and CEO, Pat Quarles.

Thank you, Jason. Good morning, everyone and thank you for joining us today.

We hope that you and your families are safe, healthy and managing well. Trecora's recent operating results and accomplishments through the first nine months of the year reflect our fundamental resilience in spite of historical challenges.

During the quarter we successfully closed the AMAK sale which was a landmark event for our company. With this divestiture we have simplified the company by narrowing our focus to specialty chemicals and advance our commitment to deliver significant value to our shareholders by dramatically enhancing our financial flexibility for growth.

With the proceeds from the sale, we have paid down $31 million of debt while also increasing our cash balance to nearly $52 million. This has brought our end of quarter debt level to its lowest level since 2014.

A strong liquidity position has enabled us to maintain safe operations at our plants and preserve our workforce levels including compensation and benefits in the midst of a challenging business environment caused by the COVID-19 pandemic. Net income in Q3 was $22.4 million which includes the gain from the sale of AMAK.

This compares to net loss in Q2 of $1.9 million. Adjusted EBITDA from continuing operations was $7.1 million for Q3, a 69% increase versus Q2 and slightly higher than the $6.9 million in Q3 of last year.

As Sami will review, we saw the expected recovery and prime product demand as we discussed last quarter. Inventory costing effects of rising feedstock prices also contributed to higher earnings in the quarter as did the significant recovery and the value of byproducts.

Our gross margin was 17.7%, 2.5% improvement from the second quarter and 2.3% better than the third quarter last year. I will note while we saw significant improvement in demand in the third quarter demand linked to refining and energy continued to be weak while byproduct spread improved significantly it remained well below pre-COVID levels.

This has been a transformational year for Trecora. Earlier this year we implemented a management system across the company that prioritizes reinforced safety, reliable operations and accountability all the while advancing this the sustainability of our assets.

During this year, we have also further developed a diversified portfolio of growth projects to deliver sustainable organic growth while requiring little capital. This has already resulted in value creation of $4 million in annualized incremental EBITDA 2020 with expectations of $6 million in 2021 and further significant growth thereafter.

We continue to work towards delivering unidentified projects, adding new projects and increasing the impact of the projects in our current portfolio. As you can see on slide 10, in our deck at the end of the quarter, we are actively managing 33 projects, an increase of eight since the end of the first quarter.

Of the 33 projects, we had 11 projects in execution phase, six in definition and 16 in ideation. We have conducted three commercial trials on our equipment with two more scheduled and we are engaged in commercial negotiations for two projects.

Some of these projects could launch as early as the first quarter of next year. The value drivers of our current portfolio abroad, a total of 14 projects are focused on delivering new products or entering new markets.

15 projects are focused on driving asset utilization with revenues that don't require significant capital and 4 projects are focused on improving productivity and reducing costs. The key drivers of these projects will be our ability to leverage the existing capabilities of our assets such as the hydrogenation distillation units at TC and idle equipment at SHR.

In the short term those assets give us the opportunity to grow our custom processing revenues by meeting the needs of other specialty chemical manufacturers on the gulf coast in a wide array of applications. Next year we expect further savings from our new feedstock agreement and from our outsourced logistics project which we spoke about earlier this year.

Over the medium term our assets will allow the development of new products to extend both our waxes and especially hydrocarbons product offerings. The level of engagement from the market indicates that the unique capabilities of our assets do fill a broad need in the market today.

It’s exciting to see the growth story come together and although it's early in the development of our growth pipeline we're encouraged to see how Trecora can grow as we go forward. Now let me turn it over to Sami to discuss the specifics of our Q3 results.

Thanks Pat and good morning to everyone. Let me start with a discussion of liquidity, debt and cash flow and then I'll discuss our third quarter and year-to-date performance in some more detail.

The closing of our non-core AMAK equity share sale marked an important milestone for the company and the fulfillment of our commitment to deliver significant value to our shareholders. Gross proceeds from the transaction of approximately $72 million include $1.5 million as consideration for the extension of the closing date.

The net proceeds the company after transaction expenses and taxes approximately $61 million. Some of these expenses you will note are included in our accrued liabilities on our balance sheet.

The sale proceeds enabled us to pay down debt and dramatically reduce our credit facility leverage ratio while building significant liquidity for future deployment. In the third quarter we reduced our bank debt from approximately $78 million at June 30th to $47 million at September 30th the lowest level of debt as Oat noted since September 2014.

Our leverage ratio under our credit agreement declined to 1.6 times at September 30th and this compares to 2.9 times as recently as March 31. Total debt including the PPP loan stood at $53.2 million at September 30th.

Our cash balance is September 30th was $51.9 million which includes proceeds of $6.1 million from loans that we received under the PPP program as part of the CARES act. Our net debt and cash positions are laid out on slide 5 of the earnings debt.

A quick update on the forgiveness process and status of our $6.1 million PPP loan. We believe, we qualify for full forgiveness based on the SBA criteria.

All of our PPP loan funds were segregated from our other operating funds and specifically used only for payroll and benefits for our employees and thus preserving employment at our sites. We expect to begin the application process for forgiveness in the near future.

However, we don't expect a determination on the forgiveness before the end of this year. In addition to proceeds from the AMAK share sale we also expect to receive federal income tax refunds as a result of the tax law changes under the CARES act.

We filed our refund claims in the third quarter totaling approximately $16.5 million. At this time we've not been advised by the IRS as to when we should expect receipt of these funds.

We understand that there are significant backlogs at the IRS with regards to processing these claims. Our 2020 year-to-date cash flow from continuing operations was approximately $22 million.

Year-to-date CapEx spending stood at $10.3 million and free cash flow which we defined as cash flow from operations less CapEx and less required debt amortization was $10.3 million year-to-date compared with $12.3 million in the same nine-month period last year. A major part of the year-to-date 2020, CapEx spending includes maintenance spending for the Gulf States pipeline project at Southampton which is part of a multi-year capital plan to rehabilitate and upgrade this feedstock pipeline.

In the fourth quarter, we anticipate capital expenditures of approximately $2 million to $2.5 million. So our total CapEx for the year should be in the $12 million to $13 million range.

In the current uncertain environment, we continue to control costs and working capital. In addition to managing all of our discretionary expenses we closely monitor the aging of our trade receivables and assessing customer credit exposures.

Now let's take a closer look at our third quarter and year-to-date performance. We reported net income in the third quarter of $22.4 million or $0.88 per diluted share which includes the net gain from the sale of AMAK of approximately $21.3 million.

This compares to net income of $0.6 million or $0.02 per diluted share in the third quarter of last year. Excluding the gain from sale of AMAK net income from continuing operations in the third quarter was $1.1 million or $0.04 per diluted share compared to $1.6 million or $0.06 per diluted share in the third quarter of last year.

Looking at year-to-date results, net income including the gain from the sale of AMAK was $31.3 million or a $1.24 per diluted share which compares to net income of 4.7 million or $0.19 per diluted share year-to-date last year. Excluding the gain from the sale of AMAK year-to-date net income from continuing operations was $5.1 million or $0.20 per diluted share and this compares to 5.9 million or $0.23 per diluted share for the same period in 2019.

Gross profit in the third quarter was $8.5 million resulting a gross profit margin of approximately 17.7% which compares to gross profit margin of 15.2% in the second quarter and 15.3% in the third quarter of 2019. Year-to-date gross profit was $22.7 million and this represents a 15.1% gross profit margin compared with $30.2 million or 15.3% gross profit margin in the same period 2019.

Adjusted EBITDA from continuing operations was $7.1 million for the third quarter 2020 compared with $4.2 million in the second quarter and $6.9 million in the same period last year. On a year-to-date basis adjusted EBITDA from continuing operations was $16.8 million and this compares to $24.6 million in the same period last year.

At a high level in comparing the third quarter results with the second quarter, the key drivers for the improvement in adjusted EBITDA from continuing operations was higher prime product sales volume and margins partially offset by weaker results in the specialty waxes segment. General administrative expenses for the third quarter were $5.8 million compared to $6.3 million in the second quarter and $6.4 million in the third quarter last year.

Year-to-date G&A expenses were $18.7 million compared to $18.5 million in the same period last year. You should note that G&A includes plant level, general and administrative expenses as well as corporate expenses.

Interest expense for the third quarter was approximately $0.5 million compared with $1.2 million in the third quarter of last year. Year-to-date interest expense was approximately $2.2 million compared to $4.1 million in the same period last year.

The almost $2 million reduction in year-to-date interest expense is due to debt reduction combined with lower interest rates. Our effective interest rate for the third quarter stood at 2.16%.

Note that there is a $4 million tax benefit on a year-to-date basis. This is primarily due to the changes to the tax laws that we discussed previously as a result of the CARES act.

We expect our fourth quarter effective tax rate to be approximately 21%. Now let me walk you through our business segment starting with specialty petrochemicals.

Adjusted EBITDA for specialty petrochemicals in the third quarter was $8.5 million compared to $5 million in the second quarter and $9.4 million in the third quarter 2019. Adjusted EBITDA margin for the third quarter was 21.6% for the specialty petrochemical segment and this compares to 17.2% in the third quarter 2019.

Specialty petrochemical sales volume in the third quarter was 17.9 million gallons compared to 15.3 million gallons in the second quarter and 20.5 million gallons in the third quarter of 2019. Year-to-date sales volume was 53 million gallons compared to 64.4 million gallons for the same period in 2019.

Prime product sales volume which is a key driver of our profitability was 14.7 million gallons in the third quarter compared to 13.1 million gallons in the second quarter and 16.4 million gallons in the third quarter of last year. We saw recovery in prime products demand in the third quarter compared to second quarter as demand increased in a number of end-use markets including expandable polystyrene, polyethylene and Butyl rubber.

This was driven by packaging and single-use customer products customer products as well as restarts of customer plants, who had reduced rates or shut down in the second quarter due to the COVID pandemic. 2020 year-to-date prime product sales volumes are down approximately 7.8 million gallons or 15% compared to the same period a year ago.

Prime product volume was down due to lower sales to the polyethylene end-use markets as well as lower sales to Canadian oil sands customers. Sales to other end use markets were also generally weaker compared to the same period last year due to the COVID-19 pandemic.

Gross margin percentage for the specialty petrochemical segment increased from 18.9% in the third quarter of last year to 21.7% in the third quarter of 2020 primarily because of improved product margins. Q3 prime product margins improved significantly from last year due to a 24% decline in natural gasoline feedstock costs.

The business benefited both from a margin expansion in our non-formula portfolio as well as the effect of inventory costing. Benchmark natural gasoline feedstock prices increased from $0.42 per gallon in Q2 to $0.86 per gallon in the third quarter.

October's average natural gasoline price was $0.87 per gallon. The trend in market pricing of natural gasoline is shown on slide 8 of our earnings deck that is posted on our website.

Recall that in second quarter the sharp decline in feedstock prices had a negative impact of approximately a million dollars due to the consumption of higher cost inventory throughout the quarter. Late in the second quarter and throughout the third quarter, feedstock prices increase leading to an approximately $3 million positive inventory costing impact.

Now moving on to byproducts. Byproduct sales volume was 3.1 million gallons in the third quarter compared to 2.3 million gallons in the second quarter and 4.1 million gallons in the third quarter of last year.

Byproduct sales volumes declined versus last year primarily due to lower prime product production. Byproduct spread improved to $0.10 per gallon from about negative $0.29 per gallon in the second quarter or an improvement of nearly $0.40 per gallon.

The sharp improvement in byproduct spread was driven by higher byproduct prices generally as a result of higher benzene prices. This was partially offset by higher feedstock costs.

Now moving on to specialty waxes. Specialty waxes segment had adjusted EBITDA of $0.1 million in the third quarter compared to $0.9 million in the second quarter and a negative $0.2 million in the third quarter of last year.

Specialty waxes generated revenues of approximately $8.5 million in the third quarter, a $0.2 million increase from the $8.3 million that was recorded in the second quarter and a $0.3 million increase from third quarter of last year. Revenue in the third quarter included about $6 million of wax product sales.

wax sales volumes increased approximately 5.4% or nearly half a million pounds from the second quarter and about 2% from the third quarter last year, which was impacted by wax feed supply disruptions. Despite the modest increase in sales, wax demand continues to be depressed due to the impact on our customers from the COVID-19 pandemic.

Processing revenues were $2.5 million in the third quarter a decrease of 9.8% from the second quarter but increase of about 5.7% or approximately $100,000 from third quarter of last year. That concludes the financial summary and I'd like to turn the call back over to Pat and then we will open the line up for your questions.

Yes. Thanks Sami.

And before we take questions, let me make a few comments on how we see the market looking in the fourth quarter. At the end of Q3 and end October we have seen international demand for our solvents increase significantly.

We're seeing recovery on a broad range of markets led by very strong demand from polyethylene producers. This volume began shipping late in Q3 and will be reflected in the fourth quarter revenue due to the long delivery times.

We've also seen strong demand into oil sands which frankly is a bit surprising. The Alberta government has removed their monthly oil production limitations affected December 1.

We're also aware of some other production limitations related to pipelines in the region being relieved. Likely tied to these events, our demand in oil sands began to increase significantly in September and again due to the long supply chain that revenue will be seen in fourth quarter and into next year.

We expect our solvent sales volumes to recover to pre-COVID levels in Q4 as a result. It's also important to note that we successfully implemented a $0.10 to $0.12 per gallon price increase for all non-formula solvents effective November.

Feedstock prices were relatively flat as we exited the quarter, you'll see that in the chart. This means the inventory cost benefits we saw in the third quarter may not repeat.

Also byproduct prices didn't rise consistent with the feedstock increases through the quarter. So byproduct spread is lower today than an average in the third quarter and although the specialty wax business was slower to recover domestic demand is now approaching pre-COVID levels.

This is what we see today. We also need to acknowledge that there remains tremendous uncertainty in the current business environment.

We're working diligently toward our goals of growth and driving value for our shareholders in every aspect of our business despite the challenges COVID brings to our business and our customers. Now we would like to open up the phone to any questions you may have.

Hi guys, thanks for taking my question. This is actually Aman, I'm jumping in for Sarkis.

So my first question is, which of Trec's key in markets are driving growth? Which ones are softer and of the softer ones when you expect those markets to recover?

Yes. So thanks for the question.

So listen I think the trends are very consistent what we talked about last quarter. So polyethylene throughout has been the forefront of the recovery from COVID and again that's tied to what we're all reading about which is the consumer non-durables packaging and so forth as all these supply chains and particularly chains to end-users have moved towards at home delivery.

So that was the first and foremost the driver. Then late in 2Q and early 3Q as we mentioned we saw the return of EPS producers.

Sami mentioned that earlier and as they ramped up in the third quarter that was a nice resurgence in demand. On the oil sands, which is another big of course in use for us that was demand was low in the second quarter.

It is relatively low in the third quarter. It came up a bit, as I just mentioned that and a little bit counter to what our expectations were is increasing significantly today and I mentioned we started shipping that product late in the third quarter.

I don't necessarily attribute that to COVID per se. I think as I said it's with the government relieving their production curtailments there even though frankly, the economics of crude production out of Alberta is still probably pretty atrocious on the margin given the fixed cost setting up there they're motivated to run higher rates and we are now seeing the benefit of that.

So that's encouraging. I think on the I guess, polyethylene essential rate the actual the exposure that we have to construction principally commercial construction of course that was a week in 2Q.

We saw it recover into 3Q and continue to recover into Q4. Appreciate of course, that's generally a historically as a seasonal component to it so effectively what we missed this year was any kind of real building season over the spring and summer.

When we talked to our customers there, they remain fairly optimistic for next year probably not getting above their 2019 level but they expect to at least get back to their 2019 level demand. So that would be a step up for us as we get into the next year.

Yes, frankly I think the biggest watch out we have and we see it in these results are the dislocations that continue to plague the refining market of course with the loss of aviation fuel demand and the imbalances that has driven through refining assets and the imbalances on kind of corresponding product values. So we see it and we sell into some refineries to help them optimize and maximize some of their processing and that has been turned back significantly and we saw that earlier this year and it continues.

So that's a real watch out for us next year. And then you see it in our co-product, our byproduct values there is the dislocation or the absence of price response for toluene and benzene relative to increasing natural gasoline is unusual and I think it reflects these continued imbalances.

So it's a very volatile input. You see it.

It bounces through our numbers every quarter. We talk about it.

The anticipation is that with the return of Styrene demand that that drives benzene consumption that we should begin to see it improve. And in fact, benzene price did go up markedly in November.

So the directionality of it is encouraging but we're still well below your kind of typical relationships natural gasoline cost and therefore our byproduct spreads are depressed right now. So that's again something we will be watching as the year ends, as the rest of the year unfolds and we get into next year.

Understood. My next question what gives you confidence that the prime product sales volume will rebound to match pre-COVID levels and would you say the volumes are sustainable and can you go from that phase?

Sure. Well of course, one bit of confidence is its November and we've got an order book that's pretty populated.

That's going to, we know is going to keep us busy through into November. So that's really where the confidence comes from.

These long lead shipments as I mentioned into either our international markets think of the middle east and southeast Asia which are markets that we consistently sell into and the return of that demand we've been loading that volume since September and that will be part of fourth quarter results and then again we started loading rail cars for sales into Alberta also in October and this month as well. So that's where the confidence comes from.

The watch out of course is that's a month and a half or two months and you still have these number out there. So we're watching it, but from what we see today that part is encouraging.

Understood. What would you say is driving the improved demand for specialty waxes?

Do you have a stable feed supply as a service growing demand?

Yes. So we need to be clear on the wax side.

So we typically talk about, if we will sell the wax that we produce and so it's more about where the wax ends up. So when we talk about our wax demand really what we're talking about is our domestic customers which bring us greater value and what we've seen through, as we entered COVID those customers they use our product for the production of furniture for instance and some durable good type applications and that came off hard like all the durables did and that recovery we are seeing today.

So we're able for our volumes to stay more domestic and we expect better value for it. So it's really, it's consistent with kind of the general trends that we see of recovery of durable demand and our access to it.

Thank you. Last question for me in the earnings release you specifically called out the expectation for significant growth next year and thereafter.

Could you help us understand the level of sales and EBITDA contribution you're expecting from the projects you out outlined in the call?

Yes. Sure.

So listen, I'm pleased with how our development of our growth portfolio has continued to mature throughout the year when we first introduced what we were doing at the beginning of the year and we've consistently tried to provide kind of the progression of the projects and the number of projects to give you some visibility into it and you can see that on slide 10 of our deck. So not only have our total count of projects continue to grow this year, you can see them advancing towards that execution and in fact we've been very busy in the second half of this year and we'll be busy through the remainder of this year running commercial trials in support of new custom processing business that can start as soon as early next year and then we'd expect to continue to lay in throughout the year.

So without getting into specifics because a lot of this is custom processing so it's highly confidential with our customers, but you should understand these are generally specialty chemical companies that are bringing us opportunities to upgrade certain streams that they have and it's specifically, again we're particularly interesting to them because of the capabilities of the assets that we have installed and available to the market. So you think about the hydrogenation unit at TC and the distillation column that was installed that has some unique capabilities available to the market and even at Southampton where you may recall about the time that I started we talked about the loss of a custom processing contract there that was valuable to us that went away at the end of 18.

So that's an asset that is available to the market and we're actively engaged in a few conversations about bringing that unit back to service as well. So that's really why we have confidence that we'll continue to see the growth that we're talking about.

So I outlined we've added about $4 million this year on incremental basis and next year we've talked about $6 million and it's really predicated on those drivers of growth and then we have cost savings that are kind of structural that we talked earlier about. We've outsourced our logistics.

We renewed a supply contract on natural gasoline all those will have further cost saving benefits to us in 2021 over the benefits that we got this year.

Got it. Thank you.

I'll pass it on.

Thank you.

Yes, good morning fellas. Pat the specialty wax business was kind of Simon's Folly and has never really performed I think the way you had hoped to or Simon certainly hope to and of course he's gone now.

Would there be any possibility or any thought to giving to the sale of that business and possibly using the loss there versus the gain on AMAK as an offset?

Hi, Tom thanks for the question. Listen, I think we've been talking pretty plainly over the last year or so on the challenges that we have generally at TC and our efforts to improve it.

It's foundational and what I mean by that is we needed to improve the reliability and consistency of the asset in order for it to be able to improve its profitability and grow. We actually have quite a few of the growth projects that we're talking about that are based at TC.

So the potential is there and of course we're absolutely focused today on driving our overall earnings growth. Now with that said, listen if that asset has more value in someone else's portfolio we're always open to that conversation, but we have a certain belief about what we can get out of it now that we think we've gotten the foundation of improved operations.

So that's always the measuring stick that we'll use to consider different options.

Okay. Thanks Pat.

Good luck.

Thank you.

Thank you. For clarification, the $4 million of EBITDA this year and $6 million next year, is that $6 million of incremental therefore that would be 10 or is that 2 million of incremental on top of the 4 to reach the 6?

It's incremental to the 4 so that's 10.

Great. Thank you and then last quarter you made the comment that you started to see customers re-engaging in projects that could lead to new business.

Now the answer to this question may lie in page 10 and seeing that the execution phase of the final has jumped to 4 to 11. But would you talk to kind of a continuation of that line of thought process and what you saw in Q2 yes Q2 and then how that trended into Q3?

Sure. So my comments earlier I made said things such as the commercial trials that we've executed we have two more commercial trials that are scheduled.

We expect to get those completed by the end of this year. Some of those commercial trials are also in the process of we're in the process of negotiating the contract side of it for providing that service to these customers.

So it is exactly what you said. It's a continuation of the engagement that started earlier this year.

Some of them have progressed again through successful commercial trials and now contract negotiations. Others we have visibility to hopefully again the commercial trial piece getting completed into this year and then getting into contract negotiations thereafter.

So I don't think all this stuff it never happens January 1 and we're off and running but what I would expect is we'll begin to see successful completion of a certain proportion of our projects and then that'll be driving the work at both TC and Southampton and then the revenues associated with it.

And Pat are you sensing that the hesitancy, I'll just call it the COVID hesitancy that you'd experienced earlier in the year that has largely dissipated now and your customers are moving forward with these projects and evaluations, etcetera or how would you gauge that level of hesitancy today versus the last time you had like the Q2 call?

Sure. Yes I guess the short answer is not really.

I mean I think we're all still dealing with the anxiety of what this pandemic is going to mean to us. Now, we certainly feel better about the fact that, the reality is the economy is running, there is demand out there.

People are consuming things and so that's helping business. But what I'd say if I look across the projects we have in our portfolio the ones I think they're active now I would say are in a simple way to characterize they're kind of structural opportunities that I think our customers have and have had and there is less sensitivity to them on what COVID might mean to them in the near term these are, we have these unique assets if applied properly.

There is value creation for us and for our customer and those are moving forward. There are other projects that we've been in conversation with in the past this year and last that I would say were more influenced by some of these COVID dynamics and then those have stopped or I'd say paused because people are kind of pulling back a little bit on things that needed kind of more optimism on growth particularly on and uses have been impacted by COVID.

Great. Thanks Pat and Sami so that you don't feel left out here you didn't pay down all the debt with the final AMAK proceeds once you go forward thinking no with the large cash balance?

Yes. I mean, I think, we've said for quite a bit of time Bill that we feel like from a capital structure standpoint 1.5 to 2 times is the right place to be on a leverage basis.

So we that was the $30 million, $31 million of debt reduction. Beyond that in terms of use of the remaining cash that's really a board decision and that's all that I can say at this point.

Obviously, it's something that's on our mind, it's on the mind of our board with everything going on externally we're just continuing to weigh the various options and kind of keep that active dialogue with our board.

Thank you both for the time.

Thanks Bill.

Hi guys.

Hi Mitch.

First question, thanks. First question had to do with the price increase on the spot market.

Can you remind us what percentage of your volume again is done through spot?

So it's about 30% and I talked about $0.10 to $0.12 per gallon being effective in November. I am really pleased with that if you look at that chart on natural gasoline spread of costs rather we talked all through earlier in the year with a fall off in natural gasoline of course past March the volume, excuse me, the margin on the what we call spot volumes of course that improved but that really started to come in as we went through the third quarter and you see the bounce back and costs.

So that was a good environment frankly for us to engage the market on capturing price increase and we did that.

Okay. And with respect to byproduct margins again as the economy recovers and demand recovers for your prime products I would assume that over time you would expect the byproduct margins to start to come back to more normalized historical levels.

That's fair assumption?

I mean, it's an assumption yes, it's a concern right now if you look at, as I said we all know that we're leveraged to the benzene price and styrene price the aromatics and they have not “re-equilibrated” to this environment that we're in with refining under so much pressure. I think a big driver for us will be a better recovery of styrene demand because that consumes a lot of benzene in the U.S.

We are seeing that recover and we are seeing benzene price go up now in November but we've got a little bit of ways to go before we get back to kind of the ratios and relationships that we had in 2019. But it should, I mean at the end of the day benzene gets traded globally basically Asia is long benzene U.S.

and Europe are short and the arbs between the regions and the demand drivers balance benzene and those mechanisms are still in place. So it should get back to normalcy but it continues to be a watch out for us.

And then, when I go back to your slide 10 with respect to the funnel. You've got the ideas, the definition, the execution just walk me through if you could how that funnel shifts so you had 25 projects Q1, 26 Q2, 33 Q3.

If I think about that as you move up in the number I've assumed there's some projects that are getting killed as that happens and other ones are fitting the front. Just kind of walk me through if you could the flow of those ones that are sort of falling out versus coming in and also if you could what helps push it or what's pushing it through the different stages or how are you defining the different stages?

Sure. So listen, this is a kind of a classic project management or new business development kind of process and what it's intended to do is you have an idea, great, you sketch it out you think you can make money.

You put a little definition to it and you start moving forward and then as you move forward usually it requires more resources to deliver it and you're getting more certainty on the value. So as you spend those resources sometimes the business case fails.

You tart either you engage with the customer and you start having pricing discussions and there is just nothing there that can be moved forward. So that comes out.

You kill it. If things look good then you continue to advance it and you may have more levels of commitment on our part or the customer's part.

So that's kind of that's the progression and the value of it is it keeps you from wasting resources later on when I did really never had legs so you try to knock this stuff out early and as you bring more, maybe if there is some capital involved and the capital estimate comes in too high and then it kills your business case. I mean that's kind of generic and kind of how it how it progresses.

So you're right and these numbers these are snapshots in time and these numbers within the stages and the progression I mean they they're moving around all the time as we go through individual project reviews. The ones that are advancing we followed that process.

So some examples I've talked about these commercial trials. So these conversations they take a long time.

A lot of the stuff that started early this year on an idea. We'll go through some maybe some lab qualification through our pilot plants to validate the technology.

If that looks good we hope we'll have a price quote and if that looks good and then we move toward commercial trial and if that looks good then you can really sit down and negotiate a deal and that's how the ones that we have some visibility to have progressed. So yes not that they're certain we're still negotiating and we still have some uncertainty on the trials but that's what gives us some confidence that we'll be able to drive this thing next year.

Okay. That's my question.

Thanks.

Hi guys. Thanks for taking the call.

Sounds like you've got a lot of positive things on the go forward next year in the projects you've been working on and there is obviously always a few challenges but I think the stock was around 950 when you announced the sale of AMAK and based on kind of what you're saying it appears that we're significantly undervalued. Do you now as far as return to cap, return money to shareholders what kind of timeline I know you said it's a board decision.

Are they actively talking about that? What where are we at in the process?

Yes. So I think both the management team and our engagement with the board we're very active in considering been going through what choices we should make on allocation of capital.

And return the capital to shareholders is certainly one of those options and I would say we're actively engaged broadly with the board on those topics.

So is there any timeline or it's just we're actively engaged?

Yes. I hate to put a timeline on because if you just think about how dynamic things are around us right now.

The visibility that we have forward is very poor and that's what's going and with what's going on around us and “the second wave” on pandemic impacts I think we're very, very careful about monitoring what that could mean to us and considering those things.

Okay. That sounds like you've got a lot of good things going.

I just -- certainly reflecting that but have a good day. Thank you.

Thank you, yes.

Thank you. Thank you all for your questions and interest in Trecora and participating on call today.

We appreciate your support and look forward to reporting next quarter on our year-end results and the progress on our growth plans. Finally as always, I want to close by thanking our people.

I'm proud of how they have taken on these unprecedented challenges and want to thank each and every one of them for their hard work and commitment and thank you again for your participation today.

Thank you.